So the Market is Essentially a Casino, Right?
- Thread starter zghorner
- Start date
Similarly, the outcome(profit or loss) is not known when the bet is placed in the stock market. Only the market can decide in the future if the bet is in the money. 
Using the casino analogy, just because one table used loaded dice, that doesn't mean the whole casino is using tinkered machines and cards.
What happened was simple a mania, pretty similar to what happened to bitcoin in 2017. Small time investors (aka newbie gamblers) got emotional about a stock and overheld their hands.
Nothing goes up forever so just because GME reached 100, that didn't mean it would go to 300. But it did go to 300, so that reinforced their misunderstanding of TA and market forces, and they thought the next step would be 500 and 1000.
HFs aren't stupid. Sure they make bad bets all the time, but they have bigger pockets and more powerful friends than the little guy. So if they short something and it goes against them, with a nice option play they can protect themselves from a bigger loss and they can wait out until little guy loses faith and has to use that investment I mean gambling money for a monthly payment. Oh yes, HFs don't play with their own money, at least most of the time. Or if they do (personal wealth invested in the same fund), they can afford to lose a big chunk, what the little guy can't. TL;DR: Their psychological pressure is different.
So although the little guys were right while they created the squeeze, there was no exit plan. It is impossible for everyone to get out on the top. They were following certain "leaders", like DFV, but he already cashed out 13MM, and the rest is just casino money for him, what he can gladly afford to lose.
So a combination of late comers pushing the price even higher, not having an exit plan, mass mania and getting emotional about an investment caused the perfect storm. And sure, the HFs called in favors, took out extra loans, and also reshorted, and just wait(ed) until the vertical chart collapse(d). After all, there is nothing new under the sun.
Just because everyone who is over 21 can enter a casino and play, that doesn't mean everyone should. People are generally stupid. Sometimes you have to protect them from themselves.
Here comes the argument of, it is my money and I can lose it any way I want. Alrighty then, should we allow ponzis to run and prey on the gullible?
Speaking of ponzis, GME with their dying business model was nothing but a ponzi. It collapsed like one. Maybe next time the little guy can pick a business that has a viable way to survive.
Is the market a casino? In a way that not everyone who enters has the same chance of winning, yes. A card counter (skill) with a stack of cash in his pocket (funds) has a much better chance than little guy playing randomly with his rent money.
The market is not a casino.
The stock market is a mechanism to link companies that need capital with investors who have the capital.
Traders (both retail and hedgefunds) are only tolerated because they provide liquidity which makes this core function smoother.
It's nothing like a casino but you can treat it like that often with predictable outcomes. Many traders have no idea about the true risk of what they are doing until it goes against them. I've been around a long time took enough hits to fully understand the risk side now. This is why I now lean heavily on fundamental analysis and long term technicals, keeping momentum and market sentiment in proper perspective. I do take some gambles but understand when to stop doing so.
The odds are NOT stacked in the houses favour. The odds are stacked in my favour longer term ( and millions like me ) if I stick to a disciplined approach and avoid getting overly distracted by the media, day traders, or short term euphoria. This is a hard lesson that takes years for many people. Like in a casino, there will always be some lucky fools ( in addition to smart players ) who simply stumbled into a short term win and got out before their foolishness destroyed their returns or ruined them. Many more not so lucky. Many investors and traders with a good plan ( properly understanding risk/reward ) do extremely well longer term.
That's not a bad analogy, but if you consider all the participants and not just the sell side, then I believe the dog track is a still better analogy.
Perhaps, but this is a site for traders. Traders buy something because it is going up in price, or sell it because it is going down, they could care less what it is they are buying or selling -- although maybe they should?..
that's a good point, but investors are also "traders" in disguise, price is part of the long term strategy, the difference is we focus on other things than price
traders love the repeated trades, long term investors love the repeated performance
If this were blackjack, some are just playing the game while some are counting cards and using good money mgmt techniques. Depending on the house rules, the latter players can have an advantage, whereas the former are probably on average going to lose money longer term. Stock markets with their natural growth over time of course makes for better chances overall then black jack. Unless one is shorting all the time then you are going against that current.
This is essentially how I see it and my OP was an analogy to card tables not slots. How many individuals make money playing cards? probably less than 5%...that number sounds familiar to me...